Petroleum Development Levy (PDL) Cap Removal
The federal government has decided to eliminate the cap on the Petroleum Development Levy (PDL), enabling a potential increase to Rs. 100 per liter starting in the fiscal year 2025-26.
PDL Increase Details
- Current PDL Rate: Rs. 78 per liter on petroleum products, including petrol and diesel.
- Proposed Increase: Sources indicate plans to raise the PDL beyond Rs. 78 per liter to address the Federal Board of Revenue (FBR) revenue shortfall.
- Purpose: The increased levy will fund subsidies for the power sector and the emerging electric vehicle industry.
- Revenue Impact: Since July 2024, the PDL has risen from Rs. 60 to Rs. 78 per liter, generating over Rs. 1 trillion in tax revenue in the first 10 months of the current fiscal year.
- Revenue Target: The government aims to collect Rs. 1,105 billion from PDL this fiscal year.
Debt Service Surcharge (DSS) Adjustment
- IMF Agreement: The government has agreed with the IMF to remove the 10 percent cap on the Debt Service Surcharge (DSS) on electricity bills, currently limited to 10 percent of power companies’ revenue requirements.
- Objective: This change aims to reduce Pakistan’s circular debt in the energy sector.
- Legislation Timeline: The federal government will introduce legislation by June 2025 to lift the DSS cap, as per the IMF’s country report on Pakistan.
Energy Sector Reforms
- Circular Debt Management: The government plans to achieve net-zero circular debt flow by fiscal year 2025 through:
- Timely tariff increases
- Targeted subsidies
- Cost-reducing reforms
- Tariff Adjustments: Commitment to continue quarterly tariff adjustments and monthly fuel cost revisions to align base tariffs with revenue needs, preventing further circular debt accumulation.
- Fiscal Year 2026 Plan: A detailed Circular Debt Management Plan will be submitted for cabinet approval by July 2025.
- Provincial Commitment: All provinces have agreed not to introduce new subsidies on electricity or gas, supporting financial sustainability in the energy sector.